What are Germany's key resources and its major exports and imports? Decide whether the country’s trade pattern supports the Heckscher-Ohlin Theorem. Why does or doesn't this trade pattern...
What are Germany's key resources and its major exports and imports? Decide whether the country’s trade pattern supports the Heckscher-Ohlin Theorem. Why does or doesn't this trade pattern support the HO theorem?
In my view, the case of Germany tends to support the Heckscher-Olin Theory. This theory holds that a country will export goods that depend on factors that it has in abundance and it will import goods that depend on factors that it does not have in abundance. Germany would appear to bear this out, though its exports do more to prove this theorem than its imports do.
Germany’s main resources are its skilled labor and its wealth. This is a country with a well-educated workforce. It is also a rich country that has a great deal of financial capital to use for purchasing capital equipment. We would therefore predict that it should export goods that use a lot of skilled labor and that are capital-intensive.
As we can see in the link below, Germany’s main exports are cars, vehicle parts, pharmaceuticals, aircraft, and refined petroleum. All of these are products that tend to need a lot of capital equipment and a fairly educated workforce. All of these things are produced using a lot of sophisticated equipment. All of them need educated workers to run the equipment and to do other things like engineering the cars and doing research on the pharmaceuticals.
Germany’s main imports are cars, car parts, and various kinds of petroleum products. This evidence does less to support the Heckscher-Olin Theorem. There is no real reason, according to Heckscher-Olin, that Germany should need to import cars and car parts. After all, these things are some of its main exports. I would speculate that Germany imports these things simply because not all cars can be made in Germany. There are other countries with the same advantages that Germany has and it makes sense that they would be able to export cars to Germany just as they import cars from Germany. Therefore, while this does not explicitly support Heckscher-Olin, I do not think that it is a major stumbling block for the theory.
It does make sense that Germany should import petroleum products. After all, Germany does not have its own petroleum reserves and petroleum is one of the major drivers of the world’s economy. Therefore, it is not at all surprising that that Germany would import oil, which depends on factors (natural resources) that Germany lacks.
One would expect that Germany would import a lot of textiles and agricultural products because these are fairly intensive in low-skilled labor. It may be that Germany does import a lot of these things but that they do not show up at the top of its imports because they are not as high in value as the cars, car parts, and petroleum.
In summary, Germany’s exports clearly support Heckscher-Olin because they depend on the skilled labor and capital machinery that Germany has in abundance. Germany’s imports are less supportive of the theory, but they do not, in my view, disprove it.